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Vol. 147, No. 24 — June 15, 2013

Icewine Regulations

Statutory authority

Canada Agricultural Products Act

Sponsoring agency

Canadian Food Inspection Agency

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Executive summary

Issues: Canada is a signatory to the World Wine Trade Group (WWTG) Agreement on Requirements for Wine Labelling (the Agreement), which imposes requirements on parties to allow certain labelling practices and to enforce a standard of identity for icewine. In order to be in a position to ratify this agreement, Canada’s regulatory framework regarding wine labelling would have to be updated.

Description: The proposed regulations would

(1) create a Standard of Identity for icewine as new regulations under the Canada Agricultural Products Act (CAPA);

(2) amend regulations to allow for Single Field of Vision (SFV) labelling for mandatory information on wine containers in the Consumer Packaging and Labelling Regulations (CPLR); and

(3) make minor text amendments to the Food and Drug Regulations (FDR) and the CPLR to harmonize their provisions with the WWTG Agreement.

The standard of identity for icewine and the other amendments are intended to come into force on January 1, 2014.

Cost-benefit statement: By making these regulations and by ratifying the WWTG Agreement, some icewine import requirements of Canada’s trading partners will be eliminated and trading of wine and icewine products with member countries will be facilitated. Having an icewine standard across the WWTG membership could reduce trade in icewine products not meeting the standard. The proposed regulation would impose costs on a small number of Canadian icewine producers who would incur costs in order to meet the certification requirement. It is estimated that this would affect less than 2% of producers. The total annualized costs are estimated at $3,758, and the total estimated present value (PV) is approximately $26,392. The total cost to the industry is a small fraction of the total value of the icewine production in Canada. The benefits of the proposed regulations outweigh the costs to the industry.

“One-for-One” Rule and small business lens: The “One-for-One” Rule applies to this regulatory proposal. It would add a small amount of administrative burden and would, therefore, be considered an “in.” The estimated incremental administrative cost is $26,392 in present value dollars, or $3,758 annualized.

The small business lens (SBL) does not apply.

Domestic and international coordination and cooperation: The WWTG Agreement promotes harmonization of wine labelling practices within Canada as well as among the WWTG member countries, which include Argentina, Australia, Chile, Georgia, New Zealand, South Africa and the United States.

Background

Canada is a founding member of the World Wine Trade Group (WWTG), a group of eight new world wine producers consisting of Argentina, Australia, Canada, Chile, Georgia, New Zealand, South Africa and the United States, that are working towards harmonizing wine regulations in order to promote wine trade. With this in mind, in 2007, Canada signed the WWTG Agreement on Requirements for Wine Labelling (the Agreement), which promotes harmonization of wine labelling practices within member countries. This Agreement is a positive force for the Canadian wine sector, as it is anticipated that the Agreement can help sustain current markets.

The WWTG Agreement stipulates that only wine made exclusively from grapes that have been naturally frozen on the vine may be labelled as icewine. For Canada, icewine is the main wine export in terms of dollar value. It provides 45% of Canada’s wine export revenue while only consisting of 1.2% of Canada’s wine export volume. Canadian exports of icewine reached $13.4 million in 2011. Over 85% of Canadian icewine exports are from Ontario, followed by British Columbia (8.5%), Quebec (4.5%) and Nova Scotia (0.5%).

Canadian icewine, as a high quality luxury product, is expensive because the production process makes it risky to make. The production of icewine not following this process is one of the major challenges facing the Canadian icewine industry. The industry has requested that the Government of Canada support the icewine industry through domestic and international agreements to protect the industry and consumers. Canada has already demonstrated its support by successfully negotiating the inclusion of a definition of icewine in the Agreement and signing the Agreement on January 23, 2007. The inclusion of the definition in Canada’s regulatory framework will assist in keeping icewine not meeting the international standard out of the country as well as assist in demonstrating to our trading partners that icewine produced in Canada meets international standards.

Issue

In order for Canada to be in a position to ratify the Agreement, changes to Canada’s regulatory framework relating to wine labelling would be required.

Objectives

The objective of these regulatory amendments is to put Canada in a position to ratify the WWTG Agreement. By including a national standard of identity for icewine, more protection would be afforded for Canadian icewine producers who wish to put an end to sales of icewine not meeting the international standard. Amending the current regulations to allow SFV labelling and other minor changes would allow better harmonization of wine labelling requirements between Canada and some of its major trading partners in the WWTG Agreement.

Description

In order to be in a position to ratify the Agreement, Canada is proposing three regulatory changes:

(1) Creating a standard of identity for icewine in new Regulations under the Canada Agricultural Products Act (CAPA);

(2) Amending the Regulations to allow for Single Field of Vision (SFV) labelling for mandatory information on wine containers in the Consumer Packaging and Labelling Regulations (CPLR); and

(3) Making minor text amendments to the Food and Drug Regulations (FDR) and the CPLR to harmonize their provisions with the WWTG Agreement.

The standard of identity for icewine and the other amendments are intended to come into force on January 1, 2014.

1. Icewine

To support the Agreement, the Government of Canada, in consultation with the provinces, territories, provincial liquor authorities and Canadian wine associations, has developed a standard of identity for icewine to be in the new Regulations under CAPA. By having domestic legislation that defines icewine, Canada would be more able to control icewine labelling in Canada and have the regulatory reference when seeking collaboration from other countries in stopping sales of icewine not meeting the international standard.

2. Single Field of Vision (SFV)

In order to ensure the inclusion of the definition of icewine in the Agreement, Canada indicated its support for allowing the placement of common mandatory information (country of origin, product name, net contents, and alcohol content) anywhere on a wine container, excluding the top and bottom, provided it can be seen without having to turn the container. This is inconsistent with current Canadian regulations, which require that this information be displayed on the principal display panel on the front of the bottle. Regulatory amendments would be required to allow SFV labelling for wine containers. It should be noted that all currently compliant wine labels would meet the proposed requirements.

3. Other regulatory amendments

In order for the Agreement to be ratified, minor changes to the FDR and CPLR must be made as well. These changes include

an allowance for a particular type size to be used on a very specific size of bottle;

an allowance for the use of abbreviations in the alcohol content declaration; and

a definition of wine in the CPLR needed for the wording of the Single Field of Vision (SFV) exemption.

These changes are expected to have no impact on industry practices or on government compliance verification activities.

Regulatory and non-regulatory options considered

Canada has signed the WWTG Agreement. The Agreement requires that parties allow required information to be displayed on wine bottles in the SFV format and that they permit imported or domestically produced wine to be labelled as icewine only if it was made exclusively from grapes naturally frozen on the vine. These requirements can only be met through regulation.

Benefits and costs

There are no anticipated impacts on the wine industry linked to the SFV amendment or to the minor amendments.

Costs

The amendments related to the icewine standard would require that wine labelled as icewine be made exclusively from grapes naturally frozen on the vine, and would recognize provincial certification programs.

Currently, there is no national standard for icewine. More than 95% of the icewine produced in Canada is from Ontario, British Columbia and Nova Scotia. Icewine from these provinces is made exclusively from grapes which are naturally frozen on the vine and is already in compliance with the proposed regulations. These provinces have all established regulatory frameworks governing their wine quality systems that include a provincial icewine standard. Each of these standards includes the requirement that icewine be made from grapes naturally frozen on the vine. Producers of icewine in these provinces should not experience any costs related to the implementation of this proposed regulatory amendment.

Quebec does not have a mandatory provincial regulatory framework governing icewine production, although a voluntary framework with a certification body does exist.

Some Quebec icewine producers are currently producing icewine using grapes that are not frozen on the vine. This practice would not meet the new requirement for making icewine from grapes naturally frozen on the vine. It is expected, however, that these producers could alter their practices in order to meet the standard. As they would continue carrying out their activities, although later in the year, it is not expected that the change in practice would lead to any increase in costs.

Quebec producers would experience some incremental administrative costs. It is expected that the incremental administrative costs for wineries in Quebec to obtain certification would be approximately $1,050, with $550 per year paid to the certification body, and an additional $500 paid by the winery for an agronomist to inspect the vineyard. It is estimated that there are 22 Quebec icewine producers. According to the Quebec certification body, as of October 2012, 16 of the 22 Quebec icewine producers are already participating in the voluntary certification program and would not see additional administrative costs with the proposed regulations.

The total estimated incremental costs potentially imposed on Quebec icewine producers would be $3,758, annualized, and $26,392, in present value.

Any icewine producers who choose not to meet the standard would have to rebrand their products, labelling them as “dessert wine,” for example.

The enforcement of the proposed regulatory amendments is not expected to create additional costs for or increase the enforcement costs to the CFIA. It is expected that current resource levels at the CFIA would be sufficient to properly enforce the proposed amended regulatory requirements.

Benefits

The WWTG Agreement, to which Canada is a signatory, commits its member countries to defining icewine as a product made exclusively from grapes naturally frozen on the vine. Canada is a global leader in icewine production. With the national icewine definition and standard, Canada would be able to protect Canadian icewine interests and to assist authorities in foreign countries (including Canada’s major icewine import markets) in controlling the growing sales of icewine not meeting the international standard. Current difficulties exist partially because those countries lack a definition and standard for icewine. Some of the import requirements among Canada’s trading partners would be eliminated and trading of wine and icewine products with member countries would be facilitated through ratification of WWTG Agreement.

An SFV labelling system for wine and icewine products among members of the WWTG would provide consistent and harmonized requirements for labelling and would facilitate trade. Wine exporters would be able to sell wine to trade partners without having to redesign their labels for each individual market. The elimination of some of the import requirements and a consistent labelling system among member countries of the WWTG would result in lower labelling costs to Canadian wine and icewine producers in the future.

Canadian icewine producers and exporters are facing challenges arising from counterfeit Canadian icewine products in some regions worldwide. According to the Canadian Anti-Counterfeiting Network (2007), Canadian icewine producers estimated that legitimate sales have dropped by more than 50% in some markets because of counterfeit Canadian icewine products. The anticipated reduction in sales of counterfeit products is considered as another potential benefit of the proposed regulatory amendments.

Having an icewine standard across the WWTG membership could reduce sales of icewine products not meeting the international standard. By defining icewine as a product made exclusively from grapes naturally frozen on the vine, the Agreement requires member countries to restrict the term icewine to products that meet that definition.

Cost-benefit statement

cost benefit

Implementation Year (2014)

Final Year (2023)

Total (PV)

Annualized Average

A. Quantified impacts (in 2012 constant dollars)

Benefits

By stakeholder

N/A

N/A

N/A

N/A

Costs

Quebec icewine producers

$4,302

$2,187

$26,392

$3,758

Net benefits

B. Quantified impacts in non-dollars (e.g. from a risk assessment)

Positive impacts

By stakeholder

N/A

N/A

N/A

N/A

Negative impacts

By stakeholder

N/A

N/A

N/A

N/A

C. Qualitative impacts

Short list of qualitative impacts (positive and negative) by stakeholder

Positive impacts:

To Canadian wineries

Canada’s ratification of the WWTG.

Canada will be able to uphold its international icewine reputation and enhance the image of Canadian icewine as a high-quality and luxury product.

Elimination of some of the import requirements among the Canada’s trading partners, resulting in lower labelling costs to Canadian wine and icewine producers in the future.

Facilitation of trading of wine and icewine products with member countries.

An icewine standard in the WWTG Agreement will help Canada and the member countries in keeping their market shares globally.

In establishing a Canadian icewine standard in law, the production requirement in the standard can also be used to support Canada’s negotiation position in future icewine-related trade negotiations.

Protection of Canadian icewine interests by assisting authorities in foreign countries in controlling the growing sales of icewine not meeting the international standard.

For non-WWTG member countries, the proposed icewine standard could be used as an educational tool to increase consumers’ awareness of Canadian icewine’s unique production process and standards.

To Canadian icewine consumers

With a better knowledge of Canadian icewine, consumers will be more willing to buy genuine Canadian icewine products.

Increased consumer confidence in Canadian icewine.

To Government and provincial authorities

Harmonization of labelling systems and certification requirements for icewine among provinces could facilitate enforcement by the Government and provincial wine authorities.

Notes:

The time period for the regulatory impact analysis of the proposed regulatory amendment is 10 years with the implementation year of 2014 and the final year of 2023.

The present value and annualized value of the impact is calculated using 7% discount rate.

The results are derived using the Treasury Board Secretariat’s Regulatory Costs Calculator.

The following assumptions were adopted in the cost estimation:

There are 22 Quebec icewine producers.

One Quebec icewine producer has been confirmed to meet the proposed icewine standard.

The remaining 21 Quebec producers will adjust the method of production of their icewine products at no increased cost after the proposed regulations come into force.

Sixteen of the 22 Quebec icewine producers are already participating in the voluntary certification program and will not incur additional cost with the proposed regulations. The other 6 Quebec icewine producers will apply for certification.

All 22 Quebec icewine producers will continue to produce and sell icewine rather than rebrand their icewine products.

As part of the certification process, the inspection of the vineyard is done every three years.

It would take about one hour for an agronomist to inspect the vineyard.

All icewine producers in Quebec are assumed to be small in size.

“One-for-One” Rule

The “One-for-One” Rule applies to this regulatory proposal. The proposed regulations would add a small amount of administrative burden, and would, therefore, be considered an “in.”

The incremental administrative costs would occur annually in the case of the certification fee and once every three years in the case of the inspection cost for Quebec icewine producers. The regulatory impact is analyzed over the 10-year analytical horizon starting from the first year of the implementation of the proposed regulatory amendments using the 7% discount rate.

The present value of the incremental administrative costs to Quebec icewine producers generated from the proposed option is estimated at $3,758 and $171 as annualized average administrative costs per business. The cost estimates also represented the total incremental costs to the Quebec icewine industry as a result of the proposed regulations.

Small business lens

The majority of icewine producers are small businesses. Over 95% of Canada’s wineries that are producing icewine are already in compliance with the regulatory proposal. This includes producers in Ontario, British Columbia and Nova Scotia that are already being certified. Therefore, there would be no incremental compliance and administrative costs for icewine producers in those three provinces as a result of the implementation of the regulatory proposal.

Sixteen of the 22 Quebec icewine producers are also already participating in a voluntary certification program and will not experience additional costs with the proposed regulations. Only 6 Quebec icewine producers will be impacted.

To minimize the costs for small businesses, the CFIA has considered a flexible option: not making regulations creating a standard of identity for icewine. With this secondary option, all current Quebec icewine producers would be able to continue to produce icewine, and none would see certification costs and administrative costs.

However, this option would prevent Canada from ratifying the WWTG Agreement and hence prevent the entire Canadian icewine industry from benefiting from the trade advantages provided by the WWTG Agreement. The preferred option is, therefore, the initial option.

description

Initial Option

Flexible Option

Short description

Regulations require grapes to be naturally frozen on the vine

Icewine production requires certification program

Regulations do not create a standard of identity for icewine

Number of small businesses impacted

22

22

Annualized average ($)

Present value ($)

Annualized average ($)

Present value ($)

Compliance costs (potential foregone revenue)

0

0

0

0

Administrative costs (certification and inspection fee)

3,758

26,392

0

0

Total costs (all small businesses)

3,758

26,392

0

0

Total cost per small business

171

171

0

0

Risk considerations

The above small business lens analysis has enabled the CFIA to determine that the small business lens does not apply.

Consultation

The CFIA engaged in online consultations with stakeholders on the proposed regulatory amendments in January and February 2012. The consultations generated 239 responses from across Canada, as well as some responses from international wine organizations. Responses were received from consumers (31), wineries (42), winemaking and agricultural associations (10), local development centres (4), tourism associations (2), liquor authorities (3), members of Parliament (4), members of the National Assembly (1), municipalities (1) and an email campaign (141)

The results of this consultation clearly indicate a geographic difference in concerns and opinions with respect to the wording of the proposed icewine definition. Consumer responses were overwhelmingly from Quebec and indicated that the Quebec method of production should be accommodated. Of 15 responses from Quebec wineries, 14 supported an icewine standard that included the Quebec method of production, while the 27 responses from wineries outside Quebec supported the proposed definition.

The Consumer Association Roundtable expressed concerns regarding the potential impacts of the labelling changes on legibility.

In November 2012, consultations with Quebec representatives indicated that they could meet the icewine definition. It was also acknowledged that a provincial system was being established to ensure product integrity.

In February 2013, CFIA undertook further consultations with provincial authorities of British Columbia, Ontario and Nova Scotia. British Columbia and Ontario indicated they were supportive of the icewine definition. British Columbia and Ontario communicated that there is a provincial regulatory entity in place that oversees the production of icewine (BC Wine Authority and VQA Ontario). Nova Scotia has the authority to create such entity.

Regulatory cooperation

The WWTG Agreement promotes harmonization of wine labelling practices within Canada as well as amongst the WWTG member countries, including Argentina, Australia, Chile, Georgia, New Zealand, South Africa and the United States.

Rationale

Proceeding with the proposed regulations and ratifying the WWTG Agreement would allow Canada to facilitate trade in Canadian icewine with member countries, protect Canadian icewine interests and assist authorities in foreign countries (including Canada’s major icewine import markets) in controlling the growing sales of icewine that does not meet the international standard. The potential benefits of this proposal for the icewine industry in Canada outweigh the costs.

Implementation, enforcement and service standards

The standard of identity for icewine and the other amendments are intended to come into force on January 1, 2014.

The CFIA has developed a communications plan, including key messages as well as an outline of activities. These activities include

A news release that will be produced, distributed to media via newswire and posted on the CFIA Web site;

Questions and answers and media lines that will be prepared to respond to public and media queries. The questions and answers will be posted to the CFIA Web site; and

A message to CFIA staff will be drafted and distributed via National InfoBulletin.

Compliance with the standard as a condition of certification will be verified by the certification body in the provincial jurisdiction of the producer.

Annex: Small Business Lens Checklist

A. Small business regulatory design checklist

Are the proposed regulations or requirements easily understandable in everyday language?

2.

Is there a clear connection between the requirements and the substantive purpose (or intent) of the proposed regulations?

3.

Will compliance promotion activities guide small businesses on how to comply sufficiently in advance of the regulations coming into force? (e.g. information sessions, sample assessments, toolkits, Web sites)

4.

If new forms are introduced, are they consistent in appearance and format with other relevant government forms?

II

Simplification and streamlining

YES

NO

N/A

1.

Will streamlined processes be put in place (e.g. through BizPal, CBSA single window) to collect information from small businesses where possible?

2.

Have opportunities to align with other obligations imposed on business by federal, provincial, municipal or international/multinational regulatory bodies been assessed?

3.

Has the impact of the proposed regulations on international or interprovincial trade been assessed?

4.

If the data or information — other than personal information — required to comply with the proposed regulations is already collected by another department or jurisdiction, if possible will this information be obtained from them instead of requesting the same information from small businesses or other stakeholders? The collection, retention, use, disclosure and disposal of personal information are all subject to the requirements of the Privacy Act. Any questions with respect to compliance with the Privacy Act should be referred to the Department’s or Agency’s ATIP office or legal services unit.

5.

Will forms be pre-populated with information/data already available to the Department to reduce the time and cost necessary to complete them? (e.g. when a business completes an online application for a license, upon entering an identifier or a name the system pre-populates with the applicant’s personal particulars such as contact info, date application opened, etc. when that information is already available to the Department.)

6.

Will electronic reporting and data collection be used, including electronic validation and confirmation of receipt of reports where appropriate?

7.

Will reporting, if required by the proposed regulations, be aligned with generally used business processes and/or international standards if possible?

8.

If additional forms (whether paper-based or electronic, including official documents and originals) are required, can they be incorporated into or streamlined with existing forms that must be completed for other governmental information requirements or that are part of usual business practices?

III

Implementation, compliance and service standards

YES

NO

N/A

1.

Can compliance occur without specific compliance promotion activities for small business?

2.

Has consideration been given to small businesses in remote areas and/or that do not have access to high speed (broadband) Internet?

3.

If regulatory authorizations (e.g. licenses, permits, certifications) are introduced, will service standards be developed that will address the timeliness of decision making and clarify for business the information/process requirements, including for complaints about poor service?

4.

Is there a clearly identified contact point or help desk for small businesses and other stakeholders?

B. Regulatory flexibility analysis and reverse onus checklist

IV

Regulatory flexibility analysis

YES

NO

N/A

1.

Does the RIAS identify at least one (1) flexible option with lower compliance and administrative costs for small businesses in the small business lens section (section 8)?

Examples of flexible options to minimize costs are

Performance-based standards;

Partial or complete exemptions from compliance, especially for firms with good track records;

Longer transition periods or temporary exemptions;

Reduced compliance costs;

Use of market incentives;

Reduced fees;

Simplified and less frequent reporting obligations and inspections;

Licenses granted on a permanent basis or renewed less frequently.

2.

Does the RIAS include, as part of the Regulatory Flexibility Analysis Statement (section 8), quantified and monetized compliance and administrative costs for small businesses associated with the initial option assessed, as well as the flexible, lower-cost option?

Use the Regulatory Cost Calculator to quantify and monetize administrative and compliance costs and include the completed Calculator in your submission to TBS-RAS.

3.

Does the RIAS include, as part of the Regulatory Flexibility Analysis Statement (section 8), a consideration of the risks associated with the flexible option? (Minimizing administrative or compliance costs for small business cannot be at the expense of greater health, security, safety or have environmental risks for Canadians.)

4.

Was the regulatory flexibility analysis validated with a reasonable sample of small businesses prior to prepublication in the Canada Gazette, Part Ⅰ?

Note that small businesses can be consulted via roundtable discussions, test panels of entrepreneurs, surveys — whether online, by phone or in person, through associations, etc.

5.

Does the RIAS include a summary of feedback provided by small business during consultations on the regulatory flexibility analysis or flexible option?

V

Reverse onus

YES

NO

N/A

1.

If the recommended option is not the lower cost option for small business (both in terms of administrative and compliance costs), is a reasonable justification provided in the RIAS?

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to section 32(see footnote a) of the Canada Agricultural Products Act (see footnote b), proposes to make the annexed Icewine Regulations.

Interested persons may make representations concerning the proposed Regulations within 75 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part Ⅰ, and the date of publication of this notice, and be addressed to Rola Yehia, Acting National Manager, Consumer Protection Division, Canadian Food Inspection Agency, 1400 Merivale Road, Tower 2, Floor 6, Room 134, Ottawa, Ontario K1A 0Y9 (tel.: 613-773-5476; fax: 613-773-5603; email: Rola.Yehia@inspection.gc.ca).

Ottawa, June 6, 2013

JURICA ČAPKUNAssistant Clerk of the Privy Council

ICEWINE REGULATIONS

INTERPRETATION

Definition of “wine”

1. In these Regulations, “wine” means an alcoholic beverage that meets the standard for wine prescribed by section B.02.100 of the Food and Drug Regulations.

STANDARD

Icewine, ice wine or ice-wine

2. Only wine that is made exclusively from grapes naturally frozen on the vine is “icewine”, “ice wine” or “ice-wine”.

LABELLING

Production in Canada

3. It is prohibited for any person to label a product produced in Canada with the designation “icewine”, “ice wine” or “ice-wine” unless the product meets the standard set out in section 2 and an entity acting under the authority of the law of the province in which the product was made has determined that the product is wine that was made exclusively from grapes naturally frozen on the vine.

Imports

4. It is prohibited for any person to import a product that is labelled with the designation “icewine”, “ice wine” or “ice-wine” unless the product meets the standard set out in section 2.

Designation includes similar words

5. For the purposes of sections 3 and 4, the designation “icewine”, “ice wine” or “ice-wine” includes similar words, as well as abbreviations of, symbols for and phonetic renderings of those words.